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LATEST NEWS UPDATES | Despite inflation slowing, government is still unable to rein in food prices

Despite inflation slowing, government is still unable to rein in food prices

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published Published on Jan 16, 2013   modified Modified on Jan 16, 2013
-The Times of India

The bad news is hidden inside the good news. Seemingly comforting headlines tell us that inflation has hit a three-year low, with wholesale price increases slowing down to 7.2% in December. But the common man will take a hit with prices of food products shooting up by 11.2% - the highest increase in almost two years.

Unlike in previous years, when increasing food prices were attributed to a sharp pick-up in prices of high value food products like milk, eggs, meat and fruits, the current surge is mainly on account of soaring prices of essentials products like rice, wheat, pulses and coarse grains like bajra, maize, barley, ragi and vegetables.

Surging grain prices are difficult to comprehend given that grain production touched an all-time high of 257 million tonnes last year. Unless one factors in higher procurement prices and large stocks of as much as 82.4 million tonnes that were cornered by the government agencies, perhaps in anticipation of a Food Security Act. This has disrupted normal trade channels and cut off adequate supply of grains in open markets.

Surging food prices will not only hit consumers, who have less money left for other purchases, but also industry which is forced to pay higher raw material prices and shell out higher wages to its employees. They also impact financial savings of households adversely, with negative consequence on investments. Rising food prices pose a big question mark for government procurement policies which corner huge stocks and truncate the markets.

What we really need are policies which would consolidate the markets and encourage farmers to respond to price signals, growing more food to bring down prices all round.

The Times of India, 16 January, 2013, http://timesofindia.indiatimes.com/home/opinion/edit-page/Despite-inflation-slowing-government-is-still-unable-to-rein-in-food-prices/articleshow/18037641.cms


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